IC/PM referral agreements in focus at compliance forum

Arrangements with former registrants could become particularly difficult, panelists say

By: Fiona Collie
April 28, 2014 April 28, 2014
16:10

Investment Counsel/Portfolio Manager (IC/PM) referral agreements will likely pose reporting challenges for fund dealers as the make up of such agreements evolve, according to panelists at the Association of Canadian Compliance Professionals (ACCP) 13th Annual Compliance Forum on Monday.

IC/PM referral agreements are likely to become more complicated for dealers as more financial planners decide to forgo licensing with a regulator, panelists said.

“We are seeing kind of the advent of the non-regulated entity,” said Francis D’Andrade, vice president, HAHN Investment Stewards & Co. Inc., who spoke as part of a panel at the Toronto event.

D’Andrade gave the example of one financial planning firm that his company deals with where the principles, who provide tax, retirement income and estate planning advice, have all given up their mutual fund licenses. “This is now on the radar of the CSA [Canadian Securities Association],” said D’Andrade, “so it’s going to get some attention.”

Fellow panelist, Karen McGuinness, senior vice president, member regulation, compliance, Mutual Fund Dealers Association of Canada (MFDA), said the movement of some registered individuals into non-registered roles has not gone unnoticed by regulators.

“Obviously as a regulator this causes us concern,” said McGuinness, “because we wonder how different are the activities that you’re preforming now that you’re unregistered then when you were registered.”

As such, McGuiness said referral arrangements with former registrants could become particularly difficult for dealers.

Just as who fund dealers make referral arrangements with changes so to will the agreements themselves. “I suspect that that type of activity will continue to increase although I’m not sure it will be through a referral structure,” said McGuinness.

Instead, McGuiness said many dealers are considering moving portfolio managed solutions into their own operations. However, due to the new client relationship model (CRM) requirements those agreements will not likely to resemble a referral structure.